Fall 2024 - AFA Final Exam Review

Front

What is simple interest?

Back

Simple interest is calculated using the formula: I = PRT, where I is the interest, P is the principal amount, R is the rate of interest per year, and T is the time in years.

Front

How do you calculate the total interest paid on a loan?

Back

Total interest paid on a loan can be calculated using the formula: Total Interest = Principal x Rate x Time.

Front

What is the formula for straight-line depreciation?

Back

The formula for straight-line depreciation is: Depreciation Expense = (Cost of Asset - Salvage Value) / Useful Life.

Front

What is the significance of the APR in loans?

Back

APR (Annual Percentage Rate) represents the annual cost of borrowing, including interest and fees, expressed as a percentage.

Front

How do you determine the monthly payment for a loan?

Back

The monthly payment can be calculated using the formula: M = P[r(1+r)^n] / [(1+r)^n – 1], where M is the monthly payment, P is the loan amount, r is the monthly interest rate, and n is the number of payments.

Front

What is the difference between subsidized and unsubsidized loans?

Back

Subsidized loans do not accrue interest while the borrower is in school, while unsubsidized loans begin accruing interest immediately.

Front

What is the concept of marketable value in relation to assets?

Back

Marketable value refers to the price at which an asset can be bought or sold in the market.

Front

How do you calculate the interest accrued during a non-payment period?

Back

Interest accrued during a non-payment period can be calculated using the formula: Interest = Principal x Rate x Time.

Front

What is the purpose of a down payment when financing a purchase?

Back

A down payment reduces the amount of the loan needed and shows the lender that the borrower is financially committed.

Front

What does it mean for an asset to depreciate to zero?

Back

Depreciating to zero means that the asset's value decreases to nothing over its useful life, often used for accounting purposes.